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Main Street Federal Funding Back on Again

The federal government has restored funding to the Main Street Enhancement Project, Public Works Commissioner Gustav James told reporters at a press conference Thursday.

"We have resolved this issue. Federal Funding has been established," James said.

"Yesterday we received written confirmation from the federal government that the Federal Highway Administration does in fact agree that the Main Street Enhancement Project is eligible for funding as originally planned," James added. He also said work was never halted on the project "because we were always confident that the facts were clear and well-documented and that these clear facts would result in the federal government’s concurrence that the project is eligible for federal funding."

The Federal Highway Administration announced Feb. 7 it had suspended funding for the work, saying contractor Tip Top Construction had improperly subcontracted management and bonding to another company, Prestige Building Co., in breach of federal oversight requirements. It suspended funding for the work indefinitely, pending a resolution of the problem.

Plans for the work began at least as far back as 2010 and, in 2013, former Gov. John deJongh Jr.’s administration put the work out to bid. There were two serious bids: one from Tip Top Construction and one from Island Roads.

Tip Top Construction sued after its $8 million bid for the work was rejected in favor of a $10.4 million bid from Island Roads. The government argued in part that Tip Top’s bid was rejected because it was "mathematically unbalanced," meaning its estimates did not line up well with the government’s engineers’ estimates. V.I. Superior Court initially granted a temporary restraining order but dropped the restraining order in January, ruling that Tip Top was unlikely to succeed on the merits.

But in April 2014, the V.I. Supreme Court reversed the Superior Court decision, saying that court applied too strict a standard of review. [Tip Top Main Street Supreme Court Opinion]

It sent the question back to Superior Court for adjudication but that court had not acted on the matter when, in August of 2015, Gov. Kenneth Mapp’s administration awarded the contract to Tip Top. In October of that year, Mapp administration officials said work should begin in November 2015. The start of work was delayed until July 2016.

According to the letter from Federal Highway Administration official Michael Avery, funding for the project was suspended because of an unapproved partnership between contractor Tip Top Construction and subcontractor Prestige Building, which he said was not previously disclosed during the bid award process.

According to the contract documents, Tip Top and Prestige’s agreement allowed the companies to pool their resources for the project, which includes the construction of a “new historic streetscape with underground utilities, concrete pavement, cobble paver and landscaping, and all related management.” The performance bond guaranty was signed on Sept. 15, 2015, by both company presidents.

The document also provides that Prestige, as the subcontractor, shall provide surety for the project along with “full financial control of the contract proceeds through a mutually agreed escrow account controlled by subcontractor.”

Contract documents also include copies of the $8.4 million performance bond, which names Tip Top Construction as the principal.

On Thursday, James said that what matters is that the performance bonds were and are in effect, are enforceable and are issued to Tip Top, not Prestige. There are two bonds, both with Westchester Fire Insurance Co.; one for performance and one for costs, James said.

Public Works disagreed with the FHA and protested the decision. After Public Works provided FHA with information from the insurance company, FHA came around, he said.

"These bonds are paid for. They are insurance policies and you can’t say it is invalid after we have bought it," James said. They were contracted and purchased using V.I. government forms, ensuring they met the requirements of the law and extended until Tip Top completed its obligations.

James said he wrote Westchester Fire Insurance Co. on Nov. 15 asking it to clarify the terms of the bond for FHA.

On Nov. 21, the deadline cited by FHA, he had not yet received confirmation, at least in part because of the Thanksgiving holiday, he said. But on Dec. 2, he got confirmation from Westchester Fire Insurance, which Public Works forwarded to FHA. The Federal Highway Administration responded Dec. 7.

"We agree the bond issued to Tip Top appears valid and meets applicable laws associated with this project. Federal funds are no longer suspended for this project," James read from the FHA letter.

"I hope this has finally settled this matter," he said.

Asked about the status of the second company, the subsidiary bond guarantor, Prestige Construction, he said, "Let’s be clear; only Tip Top is covered by this bond."

"Prestige is not a party to the bond guarantee. Prestige and Tip Top have an agreement between each other but Prestige is not a party to the bond," he said.

Asked how the work on Main Street is proceeding, James said the first block is still under construction; a 36-inch storm sewer line is being installed, along with a sanitary sewer and a force main water line.

They "expect to be out of the first block, I believe, by January," James said.

He said the work "will definitely not be completed in time for the centennial or carnival."

"We can make it presentable, we can make it acceptable but it will not be completed in time for carnival," he said. Tip Top has about 500 days for the work under the terms of the contract, he said.

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